Monetary protection: why world gold prices peaked since 2012

2020-04-07T22:12:35.582Z

World gold prices have updated the maximum since November 2012 and reached $ 1,741 per troy ounce. According to experts, investors fear another collapse of stock markets and massively buy precious metals in order to save money. Moreover, amid statements by the US Federal Reserve on an unlimited issue of money, investing in gold is becoming more attractive than investing in the dollar. As a result, analysts predict a further increase in quotes in the near future. Moreover, the situation may positively affect the value of Russian reserves.

On Tuesday, April 7, world gold prices showed a record increase in international trading. In the middle of the day, the cost of precious metals grew by almost 3% and for the first time since November 2012 exceeded the mark of $ 1,741 per troy ounce. After this, the prices were slightly adjusted and are currently near $ 1690. This is evidenced by data from the Comex Commodity Exchange.

Since the beginning of the month, gold in the world market has risen in price by almost 7%. Quotes managed to recover after a sharp fall in early spring. So, in mid-March, the cost of precious metals fell to a minimum since November 2019 and reached $ 1,456 per troy ounce.

Amid a significant collapse in the global stock market, investors massively sold gold to cover their financial losses. About this in an interview with RT said the chief analyst of TeleTrade Peter Pushkaryov.

“The sharp rise in gold prices - from $ 1,500 to $ 1,650 - started only at the end of March and coincided with the start of the rise in stock quotes in the world. The appreciation of metal observed on April 7 is also associated with the gradual restoration of the value of shares on stock exchanges, ”Pushkaryov noted.

As a result of the Asian session on April 7, the indicator of the Shanghai SSE Composite Exchange and the Japanese Nikkei grew by 2%. At the same time, during trading on European markets, the French CAC 40 index and the English FTSE 100 added 2.19%, and the German DAX index - 2.79%. The rise in stock quotes was observed in the United States. At the beginning of trading, the Dow Jones industrial index grew by 2.6%, the corporate S&P 500 - by 2.3%, and the high-tech NASDAQ - by 1.5%.

As an analyst with Finam Group Alexei Korenev explained in an interview with RT, in the context of the coronavirus pandemic, the observed growth in stock markets may turn out to be temporary. As a result, investors prepare in advance for the next collapse of exchanges and begin to buy gold as a reliable means of saving money.

“At the moment, due to quarantine measures in many countries, production has fallen by 20-30%. Everything indicates that we have not yet passed the worst point, and there may be a rather protracted recession ahead. Many investors understand this and buy gold, which has traditionally been a defensive asset, ”the analyst explained.

Moreover, additionally the demand for gold stimulates the actions of the US Federal Reserve. In late March, the US Federal Reserve announced an unprecedented expansion of the quantitative easing program. The regulator began to print dollars and buy bonds in the stock market in an unlimited volume. Such a policy should lead to an increase in the money supply in the economy and help increase GDP growth rates.

At the same time, the Fed’s measures run the risk of weakening the dollar in the long run. Thus, investors began to invest more actively in gold, the value of which does not depend on the national currency of the United States.

“The Fed’s statement of readiness to provide unlimited liquidity is perceived by investors as an additional risk that many financial assets will begin to lose value. Therefore, players transfer their money to those assets that are not dependent on the dollar, and this primarily concerns gold, ”Korenev explained.

Recall, as a result of the coronavirus pandemic, the International Monetary Fund announced the beginning of a recession in the global economy. As the head of the organization Kristalina Georgieva emphasized, because of the coronavirus, the recession may turn out to be worse than the crisis of 2008-2009 and risks turning into massive bankruptcies and rising unemployment.

Against this background, the value of gold can continue to grow until the end of the year and is able to update the historical maximum. This view is shared by EXANTE managing partner Alexei Kiriyenko.

“In 2008, after the bankruptcy of Lehman Brothers, the price of gold turned up and tripled in less than three years. From the lows of March, gold needs to grow by 32% in order to reach a historic peak of $ 1920. Gold has already done half the way, ”Kiriyenko emphasized.

According to the expert, the rise in price of precious metals can positively affect international reserves in Russia. According to the Central Bank, over the past year, the share of precious metals in the country's gold and foreign exchange reserves has grown from about 19% to 21%. By early March, the corresponding volume exceeded $ 119 billion.

According to analysts, an increase in gold prices leads to an increase in the volume of reserves in monetary terms. This state of affairs allows us to channel additional funds to support business and national currencies.

“In essence, the rise in price of gold strengthens the national“ airbag ”and increases the opportunities for influencing the appreciation of the ruble. In general, we can say the increase in gold prices is one of those factors that hinder the weakening of the national currency in the current conditions, ”said Jan Art expert at XCritical.